Investigation: U.S. Banks Funnel 'Dirty' Money

Feb. 5 -- U.S. banks, through their relationships with high-risk foreign banks, have become a funnel for dirty money into the country, and as a result, have facilitated criminal enterprises such as drug trafficking and financial fraud, a U.S. Senate investigation has found.

Through correspondent accounts they provide to foreign banks, many American banks are unwittingly being used by criminal agents or enterprises to gain direct access to the U.S. financial system and to move money within the U.S. and around the world, according to the report released today by the minority staff of the Senate Permanent Subcommittee on Investigations.

Because of generally poor monitoring of relationships with foreign banks, many Americans banks, including big banking institutions like Citibank, Chase Manhattan and Bank of America, are not even aware that criminal activities are taking place right under their noses, the report says. Those banks that were made aware of the problems during the course of the Senate inquiry have taken steps to improve security and oversight of the correspondent accounts, the report said.

Estimates of the amount of dirty money passing through theglobal financial system each year range from $500 billion tomore than $1.5 trillion. Money laundering refers to thepractice of moving illicit funds through a series of financialinstitutions to disguise their origin and ownership.

"The failure of U.S. banks to take adequate steps to prevent money laundering through their correspondent bank accounts is not a new or isolated problem," says the report, which was released by Democratic Sen. Carl Levin. "It is longstanding, widespread and ongoing."

A 1999 report on vulnerabilities in the U.S. banking system by the same subcommittee resulted in hearings on money laundering practices.

A Yearlong Investigation

Democratic staff members of the Senate committee spent a year investigating the use of correspondent accounts by U.S. banks by interviewing bank officials, conducting a survey of 20 banks and by examining civil money laundering indictments in U.S. courts.